Just like for Alice, Spain's farcical kickback and bribery scandal's rabbit hole just keeps getting deeper. This morning El Pais reports that the alleged providers of payments to the government (via the kickback fraud) - known as 'Gurtel' - received an unprecedented EUR115mm in government contracts. With more than 70 people facing charges ranging from money laundering to bribing a public official, Rajoy's efforts at coming clean have fallen on deaf ears as 79% of Spaniards are dissatisfied with the explanations. This follows a weekend of disclosures including the fact that Rajoy gave himself a 32% pay rise up to 2011 as he push austerity down the throats of his people. As El Pais notes, "...The only thing that is clear is that most of the recipients of payments on the former treasurer’s list have admitted that they accepted money in cash...." The sad political truth is, as Deutsche notes, the likeliest course of action at this stage, in our view, is that on the basis of the internal investigation, Rajoy may go as far as letting go some members of his cabinet, but we think that he will protect the “hard nucleus” of his administration and will not resign. It appears, as they note, that the Spanish government's room for maneuver (over further austerity) is significantly diminished.

Between 2006 and 2011, Rajoy’s salary from the Popular Party (PP) rose from an annual gross 146,000 euros to 200,000 euros,

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On Saturday, Rajoy did not mention Bárcenas’ papers. He merely said he never took black money, yet did not deny that payments were made. But Bárcenas’ ledgers show that secret payments to party leaders ended in 2008, precisely when Rajoy began declaring significantly more income from the PP.

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About 79% of polled are dissatisfied with Rajoy’s explanations in reaction to government corruption allegations, according to a Metroscopia poll for El Pais newspaper

96% say corruption allegations should be considered and studied seriously

72% say politicians involved in allegations should resign

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"...The only thing that is clear is that most of the recipients of payments on the former treasurer’s list have admitted that they accepted money in cash...."

The benefit of a few was to the detriment of the many. The corrupt business ring known as Gürtel obtained over 115 million euros in contracts from public agencies as well as local and regional governments under Popular Party (PP) rule, according to an ongoing investigation.

That is without counting all the private contracts that the PP awarded the business conglomerate headed by Francisco Correa ("correa" translates as "belt" in English and "Gürtel" in German). The ransacking of taxpayers' money could be even greater, though, as the investigation has not concluded yet, four years after Correa's arrest.

More than 70 people face charges ranging from money laundering to bribing of public officials in a major case of political corruption involving the PP.

The investigation shows that the hefty profits were shared out among members of the ring and some of the politicians who helped them secure the contracts.

Millions of euros were also concealed from the tax authorities. Correa has declared himself without income for the last 12 years, and is thought to have cheated the state out of an estimated 18 million euros in income tax alone between 2002 and 2007.

The regions of Madrid and Valencia were the ring's main theater of operations. The towns of Majadahonda, Boadilla, Arganda and Pozuelo de Alarcón, outside the capital, were havens of corruption for years, according to the report. In Majadahonda alone, Gürtel businesses were awarded nearly 3.5 million euros' worth of public contracts between 2001 and 2005.

The Gürtel network first came to light in 2009, when EL PAÍS obtained information on a judicial investigation being led by the since-suspended Judge Baltasar Garzón. The highest-profile trial related to the probe was that of former Valencia premier Francisco Camps, who was acquitted of taking bribes by a jury.

Deutsche Bank's thoughts on the process and outcome:

Rajoy is fighting the allegations - denying the accusation and threatening judicial action against those making those allegations and making public his own financial records. The whole matter is now no longer a merely journalistic event, but has moved to a judicial investigation - the original documents published by El Pais have been transmitted to the Madrid tribunal. The proceedings could take several months, maybe more. ABC newspaper on 8 February reported the following statement by Spain’s attorney general, Eduardo Torres-Dulce: “Justice needs to go fast, but not impossibly fast”. In the meantime, PP is conducting an internal investigation.

The likeliest course of action at this stage, in our view, is that on the basis of the internal investigation, Rajoy may go as far as letting go some members of his cabinet, but we think that he will protect the “hard nucleus” of his administration and will not resign.

Still, in any case, we think that the room for maneuver of the Spanish government has significantly diminished. In particular, the capacity for Rajoy to “sell” additional austerity measures or transitorily painful structural reforms is now lower.